Budget Smart, Invest Wise

If you’re trying to start a new company, then you are probably wondering how you go about making everything legal in the eyes of the government. While the process can be time-consuming, it all boils down to filing paperwork. One of the most important parts of starting a new business is getting an IRS tax ID application so that you can make sure that you won’t get into trouble with Uncle Sam.

Perhaps you’ve heard of the different tax IDs, such as SSN (social security number), ITIN (individual tax ID number), or EIN (employer ID number). Since you’re starting a new business, you may think that you need an EIN, but is that always the case?

Sole Proprietorship

If you’re the only person working for your company and don’t plan on hiring any employees, then you might want this option. This way, your business tax ID is the same as your personal, meaning that you don’t have to apply for anything. The downside is that your personal assets are tied to the company, meaning that if your business has debt, it applies to you personally.

Corporation

In this case, you’re creating a separate entity from yourself, which will require you to fill out an EIN application online to get your new ID number. The benefit of doing this is that the company’s assets are separate from your own, and you can hire employees.

LLC

This type of business can work as either a sole proprietorship or a corporation, based on how you want your taxes to be filed. If you want them to be separate from your own, then you will need an EIN.

If you aren’t sure if your application has been approved, then you can contact the IRS directly. You should have copies of the IRS tax ID application that you used to file, so reference that when calling them. In some instances, you can check online, but most of the time you have to call directly.

When it comes to getting an EIN, it shouldn’t be that difficult of a process as long as you follow the instructions, and ask any questions you may have immediately.